OPINION:
Federal Reserve Chairman Ben S. Bernanke’s lower economic growth estimates for this year and next diminishes President Obama’s already weakened prospects for a second term.
Mr. Bernanke said Wednesday that the anemic recovery would be a lot slower than he had expected for the remainder of this year and in 2012 when Mr. Obama will be up for re-election.
The Fed’s two-year projections were the political equivalent of a cold shower for Mr. Obama, whose mishandling of a persistently weak economy has earned him failing grades from a large majority of the electorate.
Mr. Bernanke’s report that the economy is facing “head winds … [that] may be stronger or more persistent than we thought” came in the midst of other data that showed a significant jump in unemployment claims, and a Congressional Budget Office forecast that the federal government’s debt, if the growth in entitlements is left unchecked, could swell to twice the size of the economy.
In a sharp turnaround from the Fed’s earlier forecasts that the economy would reach growth in the 3 percent to 4 percent range later this year, the central bank now expects the increase in gross domestic product to be in the mid-to-high 2 percent range - 2.7 percent to 2.9 percent. That’s well below the growth needed to bring the economy’s high unemployment rate down to normal levels anytime soon.
The Fed’s 2012 growth forecasts, which were projected in April to be as high as 4.2 percent, are now estimated at 3.3 percent to 3.7 percent.
But the Fed says the average unemployment rate will remain high this year and next, declining to between nearly 8 percent and 8.2 percent by the fourth quarter of 2012 - the worst scenario for a beleaguered president who was hoping to run a “morning in America” re-election campaign. Notably, the Fed only sees long-term, subpar economic growth in the 2.5 percent to 2.8 percent range, an anemic rate that Washington Post economics reporter Neil Irwin said would bring down the national jobless rate “at a glacial pace.”
The Fed’s forecasts put a lot more wind in the Republicans’ sails, as recent polls show that voters now have a lot more confidence in the GOP’s ability to handle the economy than either the White House or the Democrats in Congress.
The critical question for Republicans now is whether the Obama economy’s precipitous slowdown demands that they nominate the strongest candidate on the one issue that will decide the outcome of the election.
For all intents and purposes, the top Republican contenders are the three former governors who thus far have entered the race: Mitt Romney of Massachusetts, Tim Pawlenty of Minnesota and Jon Huntsman Jr. of Utah.
Texas Gov. Rick Perry may still get into the race, as could former Alaska Gov. Sarah Palin, but both may be too late to mount the kind of well-funded, nationwide campaign needed to win the nomination, let alone the election. In this day and age, presidential campaigns take a full four years or more, and that rule still stands the test of time.
Mr. Pawlenty’s campaign has been seriously undermined by weak fundraising and his own anonymity. Mr. Huntsman, a late entry, got off to poor start this week, after several embarrassing blunders by his inexperienced campaign staff, but he is also largely unknown by the electorate at large and also faces fundraising challenges.
Mr. Romney, on the other hand, who has been running for more than four years, has built a sizable campaign war chest, raising a hefty $10 million in a single day earlier this month. He has made the weak economy and jobs his No. 1 issue, identifying himself as a career venture capital investor who has helped build up some of the most successful business enterprises in the country and knows how to create jobs.
Although he faces several challenges, including the “Romneycare” plan that he enacted as governor, he is the clear front-runner at this point.
The rapidly deteriorating Obama economy plays to Mr. Romney’s experience and political strengths and, in the end, will likely trump all other issues the Democrats - and his rivals for the nomination - will throw at him.
Meantime, a little more than six months before the 2012 election year begins, the economy looms as Mr. Obama’s potential Waterloo.
The economic recovery, if there ever was one, is clearly losing ground. Punishing 9 percent to 10 percent unemployment rates show no sign of any significant decline this year or next, and one poll finds that 80 percent of recent college graduates are unable to find work. The stock market is tanking and with it, tens of millions of pension plans. Home sales continue to plunge along with home values.
If all this weren’t enough, CBO says that under Obamacare, “an aging population and rapidly rising health care costs will sharply increase federal spending for health care programs and Social Security,” causing “federal debt to grow to unsustainable levels.”
Donald Lambro is a syndicated columnist and former chief political correspondent for The Washington Times.
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